Big energy firms are refusing to supply small businesses out of concern they could go bust, while some are demanding £10,000 upfront, business owners and industry experts have told the Guardian.
In the latest sign of the deepening energy crisis, business owners said they were struggling to find a supplier in the run-up to the busy October period for renewing gas and electricity contracts, leaving them facing “extortionate” bills or demands for a deposit.
Suppliers named as having refused service, or asked for a downpayment, include SSE, Scottish Power, E.On Next, Drax and Ecotricity.
Business owners called for urgent action from the government, warning that sectors such as hospitality, which is already struggling with inflation and the lingering effects of the Covid-19 pandemic, are at particular risk.
Teresa Hodgson, landlord of the Green Man pub in Denham, near Uxbridge, was initially told by her supplier SSE that it could not give her a quote for energy because prices were increasing so fast. “When I did pin them down, they said before we can go any further, we want a £10,000 deposit,” Hodgson said.
“When I asked why, because they’ve never had an issue with me, they said: ‘We don’t think a lot of pubs are going to make it this year and we need security.’ There were other suppliers who just wouldn’t entertain it at all because it’s hospitality,” she added.
Unlike households, businesses typically buy energy in contracts that last several years, often via a specialist broker that connects them with suppliers for a quote. If they cannot find a fixed-rate contract, they move on to an out-of-contract “deemed” rate, which is uncapped and can soar in line with market prices.
Mark Dickinson, the chief executive of the energy consultancy Inspired, said some energy firms were only choosing to renew contracts with customers they already had, “so they’re withdrawing from new business. [Others are] effectively saying they don’t even want to renew current customers.”
He said this was partly down to whipsawing prices in the wholesale energy markets, caused by the war in Ukraine, which have made it harder for suppliers to price long-term contracts. Where they are agreeing fixed-rate contracts, bills have gone up sixfold, in some cases.
Energy firms have also struggled to convince credit insurers to provide cover in case customers go bust, amid reluctance to insure under-pressure sectors, such as pubs. Instead, suppliers are managing their risk by asking for upfront bond payments, even from existing customers.
The British Beer and Pub Association (BBPA) said one of its members had recently been turned down by five suppliers, a trend that threatens the survival of pubs. “With many energy suppliers now refusing to provide contracts to pubs, they are being put in further jeopardy because a lack of competition in the market is forcing them to take on extortionate contracts or remain in punitive out-of-contract rates,” said Emma McClarkin, the BBPA’s chief executive.
She said: “The market is failing the hospitality sector, and we need an energy price cap before this crisis forces pubs and other businesses across the country to close.”
Gemma Holt, the owner of Lily’s beauty salon in Whitchurch, Shropshire, said she had found it almost impossible to renew her energy contract. “We thought we had found a new energy supplier, but the first one we tried wouldn’t take us on because we are a hair and beauty business, and because of the energy usage, with the washing machine and tumble dryer going all the time.”
William Robinson, whose Robinsons Brewery business is a landlord to more than 200 pub tenants, called for urgent action. “If the government doesn’t address this, the knock-on effect could be huge,” he said. “Them taking the summer off doesn’t help us. The key thing is that it happens quickly, we can’t have a period of paralysis.”
A spokesperson for the Department of Business, Energy and Industrial Strategy (BEIS) said the government could not control energy prices but it had provided support worth £4.6bn over five years, including help for high energy usage businesses.
SSE said it asked for deposits on a “case by case basis” to mitigate risk and that the sums would be repaid at the end of a contract.
An E.ON spokesperson said: “Like many other business energy suppliers, at certain highly volatile points we have had to pause offering contracts to new customers so we can focus on supporting existing customers through this challenging time while monitoring and responding to market risks.”
A ScottishPower spokesperson said: “We’re continuing to offer energy supply contracts directly to both new and existing small business customers, and existing customers can also renew their contracts via their energy broker if they have appointed one.”
Scottish Power and Ecotricity both said businesses were required to pass a credit check.
